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February 14, 2007
Confusion and negative experiences over Digital Rights Management (DRM) is costing billions of dollars in revenue leakage, according to managed services and mobile data platform firm, End2End.
The company held a recent roundtable in London attended by a number of industry players including Vodafone, which highlighted the biggest barriers blocking the growth of mobile content adoption.
DRM and negative user experience were identified as two key factors limiting the growth of the mobile content industry, with the lack of consistency on operating systems and DRM leading to billions of dollars in lost revenues.
Patrick Parodi, chairman of the Mobile Entertainment Forum (MEF) highlighted the fact that a major factor restricting growth is the lack of a reliable framework for DRM, an instability causing revenue leakage approaching the $3bn mark last year.
“This revenue is not being received because of side-loading and the fact that traditional media companies, such as the record labels, are holding back with their copyrights when it comes to mobile distribution until there is a stable DRM system,” he said.
The findings of the panel discussion revealed concerns over the fact that mobile operators offer two different types of file formats for PC and mobile downloads. Although End2End also discovered that OMA is expected to become the leading industry standard that would permit super distribution of protected content.
Tom McLennan, manager of Vodafone music said that OMA DRM 2.0 would open the door for operators to offer an entirely new subscription based business model that would deal with the complexities of DRM.
Earlier this month, Steve Jobs, chief executive of Apple, called on the big four record labels to abolish Digital Rights Management (DRM) for portable devices.
Apple is set to make a splash in the mobile world later this year when it launches the iPhone, a combination of the successful iPod music player and a cellular phone.
Speaking candidly about the negative attitude many have towards DRM, Jobs conceded that DRM initiatives “haven’t worked, and may never work, to halt music piracy.”
Jobs claimed that less than 3 per cent of the music on the average iPod is purchased from the iTunes store and protected with DRM. The remaining 97 per cent is unprotected and the record labels get much of their revenue from selling unprotected CDs.
With an estimated 90 per cent of all music worldwide sold in a DRM-free format, Jobs claims that maintaining the remaining 10 per cent in a DRM-encumbered format is prohibitive. Not least because content providers must maintain a team of DRM-engineers and scramble to update the software every time there is a breach in the protection.
“Convincing them [the music companies] to license their music to Apple and others DRM-free will create a truly interoperable music marketplace,” Jobs said.
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